Stock futures are derivative contracts that give you the power to buy or sell a set of stocks at a fixed price by a certain date. Once you buy the contract, you are obligated to maintain the terms of the agreement.

The contracts are traded on a futures exchange. The party agreeing to take delivery of the underlying stock in the future, the “buyer” of the contract, is said to be “long”, and the party agreeing to deliver the stock in the future, the “seller” of the contract, is said to be “short”.The theoretical price of a future contract is sum of the current spot price and cost of carry. However, the actual price of futures contract very much depends upon the demand and supply of the underlying stock. Generally, the futures prices are higher than the spot prices of the underlying stocks.

Futures Price = Spot Price + Cost of Carry

Cost of carry is the interest cost of a similar position in cash marketand carried to maturity of the futures contract less any dividend expected till the expiry of the contract.

South Africa currently hosts the largest single-stock futures market in the world, trading on average 700,000 contracts daily.

The profits and losses would depend upon the difference between the price at which the position is opened and the price at which it is closed. Let an investor have a long position of one November Stock “A” Futures@ 430. If the investor square up his position by selling November Stock “A” futures @ 450, the profit would be Rs. 20 per share. In case, the investor squares up his position by selling November Stock “A” futures @ 400, the loss would be Rs. 30 per share.

U.S. Stock Futures Gain After Italian Vote Result benzinga-U.S. stock futures traded higher in early pre-market trade, as Italian Prime Minister Matteo Renzi vowed to resign after a defeat in a referendum on constitutional reforms. New York Federal...

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